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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Determining Net Purchases The following amounts were obtained from the accounting records of Newton Company, Washington Inc., and Adams Company:

Chapter 7, Problem 4E, Determining Net Purchases The following amounts were obtained from the accounting records of Newton

Required:

Next Level Compute the missing amounts.

To determine

Determine the missing amounts.

Explanation

Net method: Under net method, purchases of merchandises are recorded at the net invoice price which means the discounts are deducted from the gross invoice price.

Purchase discounts: The sellers offer a reduction in purchase price on initial purchases, to accelerate the collection of on account purchases, by their customers, within the purchase terms promptly. Such a reduction in purchase price is referred to as purchase discount.

Purchase returns: Purchase returns are the goods returned by the buyer out of the goods purchased.

Working note 1: (a) Determine the net purchases for Company N:

Net purchases=Purchases+Freight-in[Purhcases discounts][Purchases returns and allowances]=$67,200+$2,300$4,110$3,180=$69,500$7,290=$62,210

Therefore, the net purchases of Company N are $62,210.

Working note 2: (b) Determine the freight-in costs for Incorporation W:

Net purchases=Purchases+Freight-in[Purhcases discounts][Purchases returns and�

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